Ethical Issues In

Marketing

Are there any???

Presentation prepared by:

Priyanka Dhoot and Team-
Mumbai
Crane & Matten (Oxford
Publication)
& Several other students from
Across the World.
 Consumers as stakeholders (I)
Successful Business pay close and continuous attention to
satisfying the customer.

Commonplace argument that businesses are best served by

treating their customers well.

So why continued ethical abuses of consumers and poor

reputation of marketing and sales professions?
 Consumers as stakeholders (I)
Examples of organizations accused of treating
customers in a questionable manner:
Multinational drug companies
E,g High price of AIDS Drugs
Fast food and soft drink companies
Targeting children with unhealthy, high sugar, low nutrition products
Banks and credit card companies
Lending to subprime borrowers
Technology companies
Facebook and Google using browsing data for targeting
advertisements
 Key Question to Ask are
weather the satisfaction of the customer is necessarily
always consistent with best interest of the Firm

Are there situation when interest of buyers and sellers

diverge?
Contractual Theory

8
 Contractual Theory

Contractual Relationship between Firm & Consumer

Firms moral duties are created by this contractual

relationship
Moral Duties under Contractual Theory
1. Duty to Comply

Reliability

Service Life

Maintainability

Product Safety

2. Duty to Disclosure

3. Duty not to Misrepresent

4. Duty not to Coerce

 Criticism for Contractual Theory

1. Incorrect assumption that Buyers & Sellers meet as

equals in the contract

2. Disclaimers nullify contractual duties of manufacturer

3. Unrealistic assumption that Manufacturers make direct

agreement with Consumers
Due Care Theory

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 Due Care Theory

Manufacturer has

Knowledge and expertise that a consumer lacks

Duty to take special care of consumers interests

Doctrine of Caveat Venditor: establishes a set of good

business practices that protects the seller. The seller must
verify the authority of the buyer to contract on behalf of
their company. Ask for certificates of authority.
 Areas of manufacturers responsibility

Design

Production

Information
 Criticism for Due Care Theory

1. No clear rule to determine Due Care

2. Incorrect assumption that manufacturer can discover

faults before consumer buys or uses it
Social Cost Theory

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 Social Cost Theory

Manufacturer must bear

costs of any injury sustained through any defects in the

product,

even when due care is exercised,

and reasonable precautions are taken to warn users of

foreseen danger
 Social Cost Theory (contd..)

Internalization of cost leads to-

1. Efficient use of societys resources

2. Motivation to exercise greater care in production

3. Distribution of losses among all users

 McDonalds Coffee Case
Liebeck v/s McDonalds Restaurant
81 year old woman suffers third degree burns from coffee
purchased at McDonalds

Undergoes skin graft operations

Coffee was served at 180-190 F

Coffee or any food should be not served hotter than 130-

140 F
McDonalds coffee case Outcomes
Jury award:
Compensatory damages = $200,000 but reduced to
$160,000 because jury decided customer was 20% at
fault
Punitive damages = $2,700,000
Total = $2,860,000

Judges decision:
Compensatory damages = $160,000
Punitive damages = $480,000
Total = $640,000

Final settlement: Not known

Ethical issues in marketing management
product policy
At the most basic level, consumers have a right to
products and services which are safe, efficacious,
and fit for the purpose for which they are intended
Manufacturers ought to exercise due care in
establishing that all reasonable steps are taken to
ensure that their products are free from defects and
safe to use
Consumers right to a safe product is not an unlimited
right (Overeating Ice-cream , BMW crash in Chennai)
Safety also a function of the consumer and their actions
and precautions
Ethical issues in marketing management
marketing communications (I)
Ethics involved in all - Advertisement, Personal selling,
sales promotion, direct marketing, PR, and other means to
communicate to consumer

Criticisms of advertising broken down into two levels

Individual
Concerned with misleading or deceptive practices that seek
to create false beliefs about specific products or companies in
the individuals consumers mind
Social
Concerned with the aggregate social and cultural impacts,
such as promoting materialism
Ethical issues in marketing management
marketing communications (I)
Marketing communications aimed to:
Inform consumers about goods and services
Persuade consumers to purchase

Patanjali natural product claim

Airtel 4G Advertisement Even in the Forest
Red Bull gives you wings Does it
Thumps Up To Taste the Thunder
Only Natural Flavouring and Colour use of Carmine
for red colour. (Factual but misleading)
Ethical issues in marketing management
marketing communications (II)
Misleading and deceptive practices
Deception occurs when a marketing communication
either creates, or takes advantage of, a false belief
that substantially interferes with the ability of
people to make rational consumer choices
Ads should be legal, decent, honest and truthful
 PRICING ISSUES
List of unethical pricing practices.
price fixing
price skimming
price discrimination
variable pricing
predatory pricing
price war
bid rigging
dumping (pricing policy)
 Ethics in Price
Bait and switch:
Advertising one item at low prize (bait)>customers into stores>sale of different
product at higher price(switch).
Selling higher priced product is legal but advertising low priced item is
unethical

Price fixing:
Collaboration of two or more firms in setting prices usually to keep prices high.
[1] Horizontal price fixing (Aerated Drinks)
[2] Vertical price fixing (entities in a supply chain)

Predatory pricing:
Company set low price to eliminate competitors> monopoly>increase prices
Eg: Reliance Jio
E.g: Coffee Shops

Price discrimination
Eg: Goibibo
amazon.com
E.g: Holiday Season
 Product Issues
Products that create harm
Targeted at disadvantaged groups (e.g.,
cheap wine targeted to alcoholics and
homeless people)
Wasteful & unnecessary packaging
Unsafe products
Omit information
Incomplete testing of product
 Ethics in product
Surrogate Advertising.
In India alcohol and cigarette advertisements were banned outright some years
back. However, alcohol and cigarette companies alike are using the avenue of
surrogate advertisements to press forward their case

Common examples include Fosters and Kingfisher beer brands, which are often
seen to promote their brand with the help of surrogate advertising.

The advertisement display meaning is all together different to the products that they
advertise.

Planned obsolescence : purposely causing existing

product out of date by introducing new product
Eg : Windows 98, 2000, XP, Vista, Windows 8,
Windows 10 .
 Ethics in People
Exploiting Social Paradigms:
In the hopes of making a fast buck, marketers often
resort to exploiting social paradigms typical to
certain areas.
In India, for example, Several companies promote
advertisement that promotes or glorifies fair
complexion and light coloured skin. Or people with
zero size.
 Ethics in Place/ Channel
Slotting allowances:
Fee paid by manufacturer to retailer in exchange of keeping their product in their shelves.
Eg: BIBA , Park Avenue
Grey market goods:
Foreign made products imported into countries by distributors that are not authorized.
Ex: selling electronics items/China products
Exclusive territories:
An area assigned by company to distributer in which no other distributer will work.
Exclusive dealing agreements
An agreement between a company and distribution channel in which no other
distributer will work. (Only Flipkart)

Refusal to deal
 PROMOTIONAL ISSUES

False and misleading advertising

Negative advertising
Creating demand for vice or
unwholesome products
Intrusive promotions
 Ethics in Promotion

False and Misleading Advertisements

Advertisements which blatantly compare features of brands
with those of their competitors. Citing the opinion of
'experts', these advertisements claim their brands to be
quantitatively and qualitatively better than those of their
rivals.

For Example :For a clothing retailer to promote a special sale

on, say, six skirts without disclosing that stocks were limited.

For Example :Mountain Dew AD with

extra-ordinary stunts
SUBLIME Marketing

A good example of a subliminal slogan (inherently

misleading action) is the slogan known world-wide
for Nike, "Just do it". This is an example of
subliminal advertising in slogans. The phrase "Just
do it" could have many meanings, depending on the
personal experience or cultural background of the
individual who reads it.
For Example: To a crazy man, it could mean just go
out and kill everyone you see. On the other hand, to
a teenager, it could mean just do whatever you want
to do, even drop out of school, there are no rules.
 Copyrights and Patents
Copyright, trademark violations Copyright and trademark violations are punished throughout
the developing world.
Are They ?
 Ethical issues, marketing and the
consumer
Area of marketing Some common ethical problems Main rights involved
Product policy Product safety Right to safe and efficacious pro
Fitness for purpose

Marketing communications Deception Right to honest and fair commu

Misleading claims
Intrusiveness Right to privacy
Promotion of materialism
Creation of artificial wants
Marketing management Perpetuating dissatisfaction
Reinforcing stereotypes

Pricing Excessive pricing Right to fair prices

Price fixing
Predatory pricing
Deceptive pricing

Distribution Buyer-seller relationships Right to engage in markets

Gifts and bribes
Slotting fees Right to make a free choice

Marketing strategy Targeting vulnerable consumers Right to be free from discrimina

Consumer exclusion Right to basic freedoms and am
????
 Cultural Pollution

Does constant exposure to

advertisements assault our senses?
ETHICAL VALUES

HONESTY

RESPECT RESPONSIBILITY

ETHICAL
VALUES

OPENNESS FAIRNESS
 HONESTY
tell the truth in all situations and at all
times
offer products of value that producer claim
in communications.
Honour explicit and implicit commitments
and promises
 RESPONSIBILITY
make strenuous efforts to serve the needs
of customers.
acknowledge the social obligations to
stake holders that come with increased
marketing and economic power.
recognize special commitments to
economically vulnerable segments of the
market such as children, the elderly and
others who may be substantially
disadvantaged.
 FAIRNESS
Represent products in a clear way in
selling, advertising etc.
avoid manipulations and sales tactics that
harm customer trust.
not engage in price fixing, predatory
pricing, bait-and-switch tactics.
 RESPECT

avoid stereotyping customers

listen to the needs of customers
special effort to understand suppliers,
intermediaries, and distributors from other
cultures.
 OPENNESS

strive to communicate clearly

fully disclose list prices and terms of
financing as well as available price deals
and adjustments.
explain significant product or service risks
 Advantages of ethics in
marketing :
Build Customer Loyalty
Retain Good Employees
Positive Work Environment
Avoid Legal Problems
 CONCLUSION

J R D Tata said :-
Maintain the high ethical standards &
expect the same of his employees .
there is no shortcuts in life & the surest
formula for success is HARDWORK &
CONFIDENCE in your abilities ..
 Conclusion

Think before you are caught , dont be happy free cheesing..

A product by Unethical Marketing